Naveed Ahmed(5376).

ASIF RAZA
REHAN
M.UMAIR.SHOBY
AMMAR

An Islamic alternative to conventional car
financing is Islamic CAR IJARAH, which meets
the principals of Islamic Shari'ah.

IJARAH is an Arabic term with origins in Islamic
Fiqah, meaning to give something to rent.
Legally, the lease contract is not a, sale of the object,
but rather a sale of the usufruct (the right to use the
object) for a specified period of time. The sale of
usufruct is permissible in Islam,

It is established by the following Hadith narrated by '
Ahmad, 'Abu Dawud, and Al Nasa.'i on the authority
of Sa'd (mAbpwh):

The farmers during the time of the Prophet
(PBUH) used to pay rent for the land in water and
seeds. He (PBUH) forbade them from doing that,
and ordered them to use gold and silver (money)
to pay the rent.


Also, 'Ahmad, Al Bukhari and Muslim
narrated on the authority of 'Ibn 'Abbas
that the Prophet (PBUH) hired a man to
cup [water] for him, and paid him his
wages.

Car Ijarah has been designed according to the principles
of Islam and is completely interest-free. Moreover the
Ijarah contract and other documentation also comply with
Shariah requirements.

On the other hand, a conventional car-financing scheme is
actually an Interest based loan given by the financial
institution and interest is charged on that loan. Also, in
conventional car-leasing schemes, the lease contract is not
in compliance with Islamic Shariah and has Riba and
other un-Islamic elements in it.

In Car Ijarah the asset remains in the ownership and risk
of bank and the customers only pay the rentals for use of
the asset; just like house rent.

Regarding the problems encountered with the
conventional mode of car financing and regarding the
fact that such a form of financing is strictly prohibited in
Islam the following alternatives have been considered
while deciding on the option or the ultimate solution for
the car financing:

Diminishing Musharakah
Ijarah wa iqtina
Leasing Ijarah




Based on Shirkat-ul-Milk

Means joint ownership in a property

Three components

Joint ownership of the Bank and customer
Customer as a lessee uses the share of the bank
Redemption of the share of the Bank by the customer



Diminishing Musharakah is commonly used for the
purpose of financing of fixed assets by various Islamic
banks.


House financing
Car Financing
Plant and machinery financing
Factory/Building financing
Agriculture land financing
All other fixed Assets
The lessor may sign a separate promise to gift/Sale the
leased asset to the lessee at the end of the lease period,
subject to his payment of all amounts of rent. The validity
of this arrangement is subject to two basic conditions:

Firstly, the agreement of Ijarah itself should not be
subjected to signing this promise of sale or gift.

Secondly, the promise should be unilateral and binding
on the promisor only.

An Islamic alternative to conventional car financing is Islamic
Car Ijarah, which meets the principals of Islamic Shari'ah. This
is the ultimate solution or the best alternative being considered.

Leasing should not be interest-based loan or replacing interest with
rent, rather it should comply with all of the following conditions of
Islamic leasing

Moreover in the leasing or Car Ijarah the risk is not entirely of
the lessee as in the case of conventional car financing. The lessee
only has the risk of the damage to the property done due to his
negligence otherwise the bank bears all the liability of the
ownership of the car.

Thus car Ijarah is the best alternative chosen foe the Islamic mode
which is permissible by Fiqh and Shariah.


Car Ijarah is Pakistan's first "Interest Free" car-financing
scheme based on Islamic financing mode of Ijarah or
Islamic leasing. This product is ideal for interest averse
individuals, looking for a car financing scheme that
provides the convenience of a well designed product while
avoiding an interest based transaction.

Car Ijarah is simply a rental agreement under which the
car will be given to the customer on rent for a period,
agreed at the time of the contract. Meezan Bank
purchases the car and rents it out to the customer for a
period of 3, 4 or 5 years.

No applying fee
Ease of acquiring any new locally assembled car
No up-front Insurance Payment
No advance Rental
Available in tenures of 3, 4 and 5 years
As little as 20% security deposit





Security
Deposit

3 years 4 years 5 years

20% 0.03144 0.02582 0.02246
25% 0.02971

0.02443 0.02127
30% 0.02797 0.02304 0.02008

35% 0.02624 0.02165 0.01889
40% 0.02451 0.02026 0.01770

45% 0.02277 0.01887 0.01651
50% 0.02104 0.01748 0.01533

Meezan Bank purchases the car and rents it out to the customer for a period
of 3, 4 or 5 years.
For example: If you are interested in a car
costing Rs. 300,000 for a tenure of 5 years
and are willing to pay a 40% Security
Deposit, your monthly rental would be,

Rs. 300,000 X 0.01770 = Rs. 5,310/- per
month for 5 years

(All other costs will be charged at actual).